FINRA and major Exchanges fine Lek Securities for supervisory and market access rule violations
For approximately five years, Lek Securities provided market access to foreign traders who engaged in various forms of manipulative trading on US equity and options exchanges.
The United States Financial Industry Regulatory Authority (FINRA) and a number of major US Exchanges, including NASDAQ, BX, PHLX, ISE, NYSE, NYSE Arca, NYSE American, Cboe, BZX, BYX, EDGA, and EDGX, fined Lek Securities Corporation $900,000 and imposed a permanent bar from the industry on Lek Securities’s former CEO Samuel Lek.
For several years, Lek Securities provided market access to foreign traders who engaged in various forms of manipulative trading on US equity and options exchanges, including layering, spoofing, and cross-product manipulation. Samuel Lek and Lek Securities aided this trading through a master-sub account held at Lek Securities and failed to reasonably supervise it.
In the face of numerous “red flags” and ongoing investigations into the activity by FINRA, the Exchanges and the US Securities and Exchange Commission (SEC), Samuel Lek and Lek Securities allowed the manipulative trading to continue for years. Samuel Lek and Lek Securities even provided office space, computer servers, trading software, and other services to the master-sub account used by those customer-traders.
For these reasons, among others, FINRA and the Exchanges found that Samuel Lek and Lek Securities failed to supervise the activities of the firm’s registered persons to achieve compliance with applicable securities laws and regulations, and failed to establish, maintain, and enforce written supervisory procedures to supervise the types of business in which the firm engaged.
Further, Lek Securities violated the Market Access Rule, which requires broker-dealers that provide their customers access to an exchange or alternative trading system to reasonably control the financial and regulatory risks of providing such access. Disregarding repeated alerts and communications from regulators concerning potentially manipulative trading in the master-sub account, Samuel Lek and Lek Securities continued to allow their customers to engage in layering, spoofing, and cross-product manipulation.
In addition to the permanent bar against Samuel Lek individually, and the $900,000 fine against Lek Securities, the firm also agreed to certain foreign intra-day trading restrictions, an independent monitor, and undertakings.
In settling this matter, Samuel Lek and Lek Securities neither admitted nor denied the charges but consented to the entry of FINRA’s and the Exchanges’ findings. In determining the appropriate monetary sanction, FINRA and the Exchanges considered a raft of factors, including the sanctions imposed by the SEC in its parallel action against Sam Lek and Lek Securities.
